2/12/2008 @ 11:30PM

Julius Baer To Spin Off U.S. Mutual Fund Unit

Apparently, now is as good a time as any for Julius Baer to hold an IPO.

On Tuesday, the Swiss-based wealth manager announced it intended to publicly float the stock of its mutual fund subsidiary Julius Baer Americas, seeking to concentrate on its core private banking business. The company expects the offering to be completed in 2008.

“The U.S. business was always good in terms of performance and a strong contributor to growth,” said analyst Christian Stark at CA Cheuvreux. “Yet, due to management’s significant stake, profitability was not as strong because those who started the business had a high stake.”

Despite the profitability problems, Stark said the U.S. business fueled overall growth in a stretch when Julius Baer’s private banking side was underperforming.

“But now that growth is back at good levels on its banking side,” Stark said, “Julius Baer is less dependent on having growth on its asset management side.”

Julius Baer Americas has some one the most successful international equity mutual funds in the United States. Between 2002 and 2007, its assets grew from $2.9 billion to $73.2 billion. Stark estimate the value of the business at 3 billion Swiss francs ($2.7 billion).

Despite the current frosty credit market and general malaise in the economy, there are reasons to be optimistic about the offering. The company has an outstanding track record–all of its funds have a four- or five-star rating from Morningstar–and it is benefiting from a trend in which more Americans are seeking to invest in international equities.

Separately, shares of Julius Baer soared on rumors that
Goldman Sachs
is planning to offer 100 Swiss francs per share for the company. Incidentally, Goldman Sachs is slated to serve as the global coordinator and and book runner for its mutual fund unit’s IPO.

“There is a takeover rumor linking Julius Baer to Goldman Sachs. It is all over the place now,” said a Zurich-based trader who requested anonymity.

Julius Baer last week reported better than forecast full-year earnings of 1.1 Swiss francs ($1.0 billion), up 31% year-on-year, due to strong performance in its core business of private banking and asset management.